Customs broker license revocation overturned after authorization and KYC validated and s108 statements excluded for procedural lapse.

Decision addresses alleged contraventions of customs broker regulations concerning authorization, client advisory duties, due diligence, and KYC verification. The analysis finds the authorization document to be valid notwithstanding its source, and holds that reliance on third-party oral statements was improper because required procedural safeguards for admitting such statements were not followed, so allegations under duties to advise and to exercise due diligence were unestablished. The KYC-related charge failed where requisite documents were obtained and not shown to be forged. Consequently, the revocation and penalties based on these violations were set aside and the appeal allowed.

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Issues: (i) Whether the Customs Broker contravened Regulation 10(a) of the Customs Brokers Licensing Regulations, 2018 by obtaining authorization from a third party rather than the importer; (ii) Whether the Customs Broker contravened Regulation 10(d) by failing to advise the client and report non-compliance; (iii) Whether the Customs Broker contravened Regulation 10(e) by failing to exercise due diligence regarding the nature of imported goods; (iv) Whether the Customs Broker contravened Regulation 10(n) by failing to verify IEC, GSTIN, identity and functioning of the client using reliable documents.

Issue (i): Whether Regulation 10(a) was violated because authorization was received from a third party rather than from the importer.

Analysis: The authorization letter in the record expressly authorized the broker for clearance. The impugned finding relied on statements recorded under section 108 of the Customs Act; however the procedure mandated by section 138B was not followed making those statements inadmissible for proving lack of authorization. There is no denial of the authorization by the importer and no finding of forgery or manipulation of the authorization document.

Conclusion: Regulation 10(a) was not violated; the finding of contravention is set aside in favour of the appellant.

Issue (ii): Whether Regulation 10(d) was violated for failure to advise the client and report non-compliance.

Analysis: The departmental finding primarily relied on a statement recorded under section 108 about markings on the consignments. That statement could not be relied upon because the section 138B procedure was not followed to render it admissible.

Conclusion: Regulation 10(d) contravention is not established and the finding is set aside in favour of the appellant.

Issue (iii): Whether Regulation 10(e) was violated by failing to exercise due diligence with respect to the consignments.

Analysis: The conclusion of failure of due diligence was based on statements under section 108 regarding package markings. Absent compliance with section 138B, those statements cannot sustain the charge. No independent admissible evidence establishes the broker's failure of due diligence.

Conclusion: Regulation 10(e) contravention is not established and the finding is set aside in favour of the appellant.

Issue (iv): Whether Regulation 10(n) was violated by not verifying IEC, GSTIN, identity and functioning of the client using reliable documents.

Analysis: The record shows KYC documents were obtained (allegedly via a freight forwarder). There is no finding or allegation that the KYC documents were forged or manipulated. The regulatory requirement is verification of correctness using reliable documents; mere receipt of documents through a third party does not, without more, establish non-compliance.

Conclusion: Regulation 10(n) was not violated; the finding is set aside in favour of the appellant.

Final Conclusion: The impugned order revoking the license, forfeiting security and imposing penalty cannot be sustained as the established findings of contravention under Regulations 10(a), 10(d), 10(e) and 10(n) do not stand; the appeal is allowed and the order is set aside.

Ratio Decidendi: Statements recorded under section 108 of the Customs Act are inadmissible to prove substantive contraventions unless the mandatory procedure of section 138B is complied with; verification requirements under the Customs Brokers Licensing Regulations are met by authentic KYC/authorization documents unless forgery or falsity is shown, and receipt of documents via a third party does not ipso facto establish regulatory violation.

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